KOTVAL, C. J. - (1.) THE question referred for our decision under s. 66(2) of the Indian IT Act is : "Whether, on the facts and circumstances, the Tribunal was right in holding that the assessee's case falls under s. 34(1)(a) ?"
(2.) THE assessee is an individual and we are concerned with the asst. yrs. 1950-51 to 1954-55 both inclusive, the relevant accounting years being the financial years ending 31st March. One Tankwalla had taken on long lease certain open plots of land at Worli in Greater Bombay. THEse plots were requisitioned under the Defence of India Rule No. 75(1) for the purposes of the military in December, 1942. Later on, the requisitioning was continued under the Bombay Land Requisition Act, 1948, for the purposes of the Home Department of the Government of Bombay. THE owner of these plots (Tankwalla) had mortgaged them with the ABC Bank Ltd. but that bank went into liquidation and the plots were acquired by the assessee from the liquidator of the bank. This was on the 6th September, 1949, during the accounting year 1st April, 1949, to 31st March, 1950, the assessment year being 1950-51. In his return for that year, the assessee did not show any income from property and when questioned before the ITO, the assessee had stated that the Government was considering the question of payment of compensation in respect of these properties which had been requisitioned and, therefore, the assessee "could not be sure of the amount that he would receive as rent for the properties". THE assessee did not deny that he was the owner of the property. THE ITO thereupon estimated the income from the properties requisitioned by the Government at Rs. 1,600 for that year and included it in the assessment for the year 1950-51. Similar estimates were made by the ITO for the subsequent years 1951-52 to 1957-58. THEse assessments of property income were made under s. 9 for the asst. yrs. 1950-51 to 1955-56 both inclusive, but for the years 1956-57 and 1957-58 the income was assessed under s. 12 as from "other sources". In the meantime other events were taking place on the basis of which the proceedings under s. 34(1)(a) of the IT Act with which we are concerned were commenced against the assessee. The assessee continued to prosecute the proceedings for assessment of compensation payable to him by Government and an order came to be passed by the Collector on 31st August, 1955. According to the assessee, this order was served on him some time in August, 1957, by the Estate and Land Manager, Bombay Municipal Corporation. Pursuant to that order an agreement was entered into with the Collector of Bombay whereby Government agreed to pay the same amounts which had been fixed as compensation payable to the assessee. The agreement was entered into on 14th February, 1958. As a result of this order fixing the compensation, the present proceedings were commenced under s. 34. The amount fixed as compensation for these plots was Rs. 823-6-0 per month from 6th September, 1949, and as a result the assessee showed as his income for the year 1958-59 Rs. 9,880 (i.e., 823-6-0 x 12) per year. On the 15th November, 1958, the ITO, Companies Circle 1(2), Bombay, wrote to the assessee informing him that the assessee had stated before him that the Collector had fixed the rent in respect of the four plots at Rs. 9,880 per year and he had similarly shown that amount in his IT returns. He therefore, pointed out that the quantum of the lease rent in respect of the plots had become definite only by the agreement dated 14th February, 1958, and the ITO proposed to assess the assessee for the entire amount for the period from 6th September, 1949, in that assessment year itself, viz., 1958-59. The assessee protested by his letter dated 20th December, 1958, that ". . in any case all the sums cannot accrue on that date as mentioned by you in your letter. Therefore, only a sum of Rs. 9,880 is taxable during the asst. yr. 1958-59". It appears that this stand of the assessee was accepted by the Department and in consequence notices came to be issued under s. 34(1)(a) for the reopening of the assessment for the asst. yrs. 1950-51 to 1954-55 both inclusive.
(3.) NOW the assessee on his part says that the notices under s. 34(1)(a) could not be issued because the requirements of cl. (a) of s. 34(1) have not been fulfilled. He, however, does not dispute that the notices could be issued under s. 34(1)(b), that is to say, for the asst. yrs. 1955-56 to 1958-59. If notices could not be issued under s. 34(1)(a), then obviously the assessments for the earlier years which are the years in dispute before us would be barred by time. Thus the question resolves itself into a question whether the grounds under s. 34(1)(a) have been made out in the order to enable the Department to assess the assessee under s. 34(1)(a). Now the main order of the ITO was passed in the asst. yr. 1950-51 and the view which the ITO took is clear from paragraph 3 of that order. In response to the notices under s. 34(1)(a), the assessee had filed a return showing the same income as was originally assessed by the ITO, that is to say, Rs. 1,000 per year and on his behalf it was further argued that s. 34(1)(a) could not apply. It was also urged that the income having been assessed under s. 9 by the ITO in the earlier assessments, the ITO could not assess the additional income received later on. In rejecting this contention the ITO observed : "At the time of the original assessment proceedings, the Government was considering fixation of compensation for the requisitioned properties and it was by order dated August 31, 1955, that the Compensation Officer, Bombay, fixed the recurring compensation for the 4 plots comprising the assessee's property at Worli which were requisitioned. Compensation was fixed at a rate per month from September 6, 1949. It was on August 31, 1955, that the rent has been quantified. However, the assessee was entitled to rent from the date of requisition, i.e., September 6, 1949. I have therefore to assess the proper rent fixed by the Government as payable to the assessee for the whole period from September 6, 1949, onwards. It is incorrect for the assessee to argue that s. 34 (1)(a) does not apply." It will be seen from this order that so far as the ITO is concerned, he did not go into the question whether the requirements of cl. (a) of s. 34(1) were in the first place fulfilled. In fact, he did not apply his mind to the requirements at all.;